The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

Continued from page 2

Chang is credited with integrity in personal and business dealings. As late as this year he was photographed riding the Taiwan rail system to work, barely taking enough room to open his newspaper. When, in 1998, he became a director and initial investor, with 50 other tech executives, at must-read Taiwan geek daily Digitimes , he told the first board meeting that the editorial team shouldn't be meddled with . "He has set a high standard for all of Taiwan," said Digitimes President Colley Hwang. (Chang owns a small piece of Digitimes but left the board years ago.)

"His emphasis on integrity is the key," agrees Stan Shih, a cofounder of Taiwan computer maker Acer who joined TSMC's board in 2000. He credits Chang with a big improvement in TSMC morale since his return as CEO in 2009. "I have learned a lot by participating on his board," Shih says.

"He is very much like the founder of our company, Irwin Jacobs," Qualcomm's Mollenkopf says. "He is an old-school gentleman who is technically accomplished. It is important to him to know the people he does business with."

TSMC also continues to set the mark for the economy that has grown up around it. The company's capital spending next year could total an eighth of Taiwan's total. TSMC buttresses Taiwan's global competitiveness in industries ranging from machinery to auto parts because of the importance of chips in those businesses, Acer's Shih says.

Chang in his initial pullback had more time for reading (he contemplatively smokes a Dunhill pipe) and hobbies, such as bridge, which he says shares a skill with business strategy: "thinking through the whole hand and thinking through the whole situation." But even today he puts down his favorite books long enough to jog regularly, which may explain why, at 81, he seems barely to have aged in a decade. Genes are on his side, too: His mother just died this year at 102.

After he returned to lead TSMC in 2009, Chang ramped up R&D spending--that staff has grown by 70% to 5,000, of a total of 36,000 employees. "As Moore's Law progresses, it takes more and more resources to keep it going," he says of the familiar industry formula for ever expanding computing power. More controversially, Chang has dramatically boosted capital spending, from about $2 billion a year under Tsai to as much as $9 billion this year.

"We are still subject to the cycles in the market, but we are at a higher level of revenue and profit, and we have also increased the technology distance between us and our erstwhile competitors," Chang says.

Today, with its heft, TSMC is increasingly in a league with two giants: Intel and the chip arm of Samsung Electronics. Meeting with FORBES ASIA in early November, Chang declines to mention either by name as rivals, saying he still sees Intel, which is currently a TSMC customer, "as a friend." "But," Chang continues, "of course in elevating ourselves technologically, we have also run into new competitors. C'est la vie ," he chuckles.

TSMC's competition with Samsung is the most straightforward. The Korean company makes chips for Apple but has increasingly become an Apple rival and target of patent infringement suits. Most expect Apple is looking to limits its supply ties, a move that could benefit TSMC as early as 2014, according to a September report by JPMorgan. Revenue from Apple could total 20% of TSMC's new business that year, it said. Chang calls the reports "speculation" but says: "Apple is very definitely a potential customer. They're not making semiconductors. They may be designing semiconductors and [integrated circuits], but they will not be making them." That has them a top potential customer for Chang's contract business.

TSMC's ties with Intel have become more complicated in the past few years, especially as Intel's reliance on powerful, relatively pricey chips for PCs isn't generating much growth at a time when less powerful chips will work for mobile phones. "They have great process and manufacturing technology but not the products that smartphone companies want," says Matt Cleary, an independent chip industry analyst in Taipei.

But this is a big-stakes game. Manufacturing costs are rising. The percentage of the cost of making a wafer that comes from lithography machines needed to do ever finer work has ballooned. TSMC in October invested almost $1 billion in lithography machinery maker ASML--following purchases of stakes by Intel and Samsung--to try to "keep up the pace of cost reduction" for customers, Chang says. Moore's Law may be scientifically achievable, but the economics may be more challenging, Cleary says, echoing Intel's Bohr. Chang says it has at least a decade to run, assisted by new types of three-dimensional chips.

Chang thinks he has plenty to keep him occupied at work. "I don't have any plan to change," he says, seated in a conference room where paintings done by his current wife hang on the wall. Nevertheless, his move toward a co-COO system at the company this spring--in which three individuals report to Chang--could pave the way for a successor. Chang says the switch was to breed good thinkers who could also run businesses. "I really would like to train more businessmen. The three co-COOs used to each head up a function. They were never really given the challenge of being businessmen. And they were only strategists in their own function. And I think a good businessman needs to be a good strategist."

Elevating the three also will give staff under them a boost in importance. Chang himself mentors six VPs, he says.

All the buildup in capacity is not going to impinge on profits, the CEO says. "Probably 2012 will be a good year. I really think that 13, 14 and 15 are going to be even better than 12." Why so? "Because we are just at the start of the mobile product [wave]," he says. "It is the mobile products that are changing the game here," along with new types of digital games.

And so Chang comes off as hopeful for TSMC as on the day he started out with his contract model a quarter-century ago. "I'm an optimist. In this business you have to be optimistic--optimistic with reasons," and, he adds, "I think I've got good reasons to be optimistic."